Citi Capital Advisors, the global alternative asset management platform of Citigroup Inc. (C), acquired the collateralized loan obligations (CLOs) business from DiMaio Ahmad Capital LLC.
Management responsibilities for the four CLOs acquired include Duane Street CLO I, Ltd., Duane Street CLO II, Ltd., Duane Street CLO III, Ltd., and Duane Street CLO IV, Ltd. Collectively they manage $2 billion in assets.
CLOs are a form of securitization in which payments from multiple middle sized and large business loans are pooled together and passed on to different classes of owners in various tranches. It is a type of collateralized debt obligation wherein high-risk, high-yield loans are clubbed together and then divided into securities of different risks and returns.
The acquisition expands Citi Capital Advisors’ assets under management to $18.2 billion and CLOs and other loans to $2.8 billion. It would leverage Citi’s expertise and infrastructure in fixed income credit.
Over the past two years, Citi Capital Advisors has expanded its fixed income investment business and increased its product offerings. Over the coming years, the company intends to increase its credit product offering.
Citi Capital Advisors manages more than $16.2 billion in assets across more than 25 funds/managed accounts and three businesses: Market Strategies, Private Equity and Infrastructure. This division has a global reach and extensive resources and benefits from Citi’s presence around the world in both developed and emerging areas.
We believe that Citi’s effort to boost this business would be a strategic fit and hence support the top line. Recently, Carlyle Group also acquired a $500 million CLO from Foothill Group Inc., a unit of Wells Fargo & Co. (WFC).
Citi currently retains its Zacks #3 Rank, which translates into a short-term Hold rating. Also, considering the fundamentals, we are maintaining a long-term Neutral recommendation on the stock.
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